Stripe – Digital Payments Are Helping Build A New Generation Of UK Businesses

Michael Moore joined TechWeek Europe in January 2014 as a trainee before graduating to Reporter later that year. He covers a wide range of topics, including but not limited to mobile devices, wearable tech, the Internet of Things, and financial technology.

James Allgrove, head of business development at Stripe, tells TechWeekEurope about the company’s future plans, including a new partnership with Visa

As digital payments and e-commerce become an increasingly vital part of a businesses’ core strategy, more and more attention is being paid to working with the best online payments companies around

Stripe is one of the world’s leading payment processors, a point recently reinforced by the company’s announcement of a tie-up with Visa which will see the two work together to help improve the ease and flexibility of digital commerce for its customers.

To find out more, TechWeekEurope spoke to James Allgrove, Head of UK Growth at Stripe (pictured below), to find out what makes the UK such a vibrant place to set up a business and how the company can help businesses large and small to prosper.

First off, what are the immediate benefits of working with such an established name as Visa?

New types of businesses are thriving on the web and on mobile devices. They are gobbling up spending that’s traditionally happened offline, and are using and accepting credit cards in brand new ways.

A partnership between Visa and Stripe will result in tighter, smoother integrations for new services like these, make them more reliable, and accelerate new kinds of commerce around the world.

Specifically, it means that we will jointly develop technologies that improve security, reliability and experience for merchants accepting Visa, putting us in a stronger position to shift commerce online. We will work to accelerate Stripe’s international expansion, particularly in emerging markets. The partnership will also extend the Visa network and optimise the payment experience for consumers.

What is yours/Stripe’s opinion of the UK market for digital payments at the moment? Is the country ahead of its European neighbours and the US?

As mobile brings the internet to everyone in their pocket, the internet is increasingly becoming a utility. Consumer behaviour is shifting from browsing on smartphones to buying. Accordingly, the most successful internet businesses today are geared more towards commerce than advertising.

British entrepreneurs are thriving in this environment. They’re building a new generation of business models, from sharing economy services like Hassle, through to mobile marketplaces like Lyst and crowdfunding platforms like Seedrs. As these models have a particular complex set of payments needs, there is strong demand in the UK for tools to handle complex transaction flows between buyers and sellers, and optimise for mobile.

The UK really leads the way in terms of online spend and mobile penetration. Because of the relatively smaller geographic size of the UK (versus the US, for example), shipping is cheaper and more reliable, so there is much innovation around distribution and business models.

Similarly, because of the smaller domestic market in the UK, British entrepreneurs are generally faster at building international businesses than their American counterparts. This means we see a strong trend in UK startups wanting to accept payments in multiple currencies to achieve international scale quickly. Think of Lostmy.name, for example, which is already selling its children’s personalised books around the world, in 11 currencies, in six different languages just a year after they pitched the idea on Dragons’ Den.

What, if anything, needs to be done in order to encourage more British businesses, large and small, to adopt digital payments?

The payments infrastructure we have today was built for offline commerce and so there is a mismatch between the needs of internet businesses and the functionality of this infrastructure. This has left us in a situation where only 2 percent of consumer spending happens online, despite the web being more than 25 years old. The Internet is borderless in terms of content and communication, but we’ve created artificial borders which make it difficult for people to transact with each another online, which hinders online commerce.

At Stripe, we approach this problem as one rooted in code and design, rather than in finance. With this approach, we hope to shift commerce online and level the playing field for entrepreneurs building internet businesses in the UK. Just as anyone can email anyone else with an email address globally, people should be able to transact seamlessly too.

What are some of the most common security issues your clients are reporting?

As mentioned, the traditional payments infrastructure was built for the offline world, which creates some unique security challenges when transposed into the online world. This has generated a lot of rules to comply with, such as PCI compliance, designed to keep cardholder data safe and secure.

At Stripe, we believe merchants shouldn’t have to spend time interpreting and managing these complex procedures, instead we’ve designed the product from the ground up with a view to minimise the burden that our users need to take on themselves.

Most merchants aren’t fraud and security experts, which is why we’ve seen so many high profile security breaches over the past few years. Merchants are generally pretty happy to get out of the business of storing and being responsible for securing credit card numbers.

Is two-factor authentication the way forward to ensure effective mobile security? Or can biometrics play a part?

We also view biometrics as another form of second-factor authentication. It is one that is more secure than other currently available methods. Therefore, it’s natural that we’ll see a shift to biometrics as the preferred form of authentication. This trend is reinforced by the widespread deployment of biometric readers in consumer devices, for example Apple Pay.

Why isn’t Stripe looking to compete with card providers? Surely this is a good opportunity to benefit from security-conscious consumers looking for a safer way to pay?

Stripe is platform-agnostic — we view our role as a facilitator of commerce, rather than as a payment method. We’re not jostling with merchants, credit card networks or banks to get in front of consumers. In many ways, the whole idea behind Stripe is for the merchant to own the customer’s journey fully. This is the foundation for the partner ecosystem around Stripe which helps us make online payments more secure and reliable.

How do you see the UK’s digital payment market evolving over the next 6-12 months?

A huge amount of consumer spend is moving to mobile, and Apple Pay’s arrival in the UK will be game-changing for businesses looking to take advantage of this trend. It cuts out all the friction to buying on mobile and brings the added security of seamlessly integrating biometrics and tokenisation into the payment process. It will spawn a new generation of apps and provide a significant boost to the UK’s app economy.

Just as mobile devices become more ubiquitous, online marketplaces are taking off. Payments used to be a blocker to achieving scale with marketplace platforms, but now it’s an enabler. Entrepreneurs building the next Airbnb are using payments technology to connect buyers and sellers, and bring the entire transaction onto the platform. Over the next year or so, we’ll see more marketplaces using payments technology to scale internationally and optimise for mobile.

We’re also seeing a new era of social commerce on the horizon. Stripe has secured partnerships with Facebook, Pinterest and Twitter to support ‘buy buttons’, meaning businesses will soon be able to sell things within the most popular mobile apps. This will close the loop between social media activity and spending, creating a whole new channel for commerce and enabling people to buy at the point of discovery.

How about Square? What is your strategy now going forward in the UK?

They are operating in a completely different space from us. Square is great for buying a cup of coffee, paying your hairdresser, and so on. Stripe is focused on the internet economy, in particular on growing the internet economy and figuring out what new transactions can be enabled. We’re both close to payments, but we’re approaching the problem from quite different angles and targeting different businesses.

In terms of what’s next for us in the UK: we’re looking to maintain the momentum we’ve built up over the past two years, enable new types of businesses to succeed and help larger companies future proof their businesses.